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Wanted: Rooms & Runways

Rooms and runways will be the key focus for Australia’s tourism and hotels market in the coming years amid forecasts that visitation from Chinese tourists will skyrocket to 3.2 million annually by 2025.

This is one of the conclusions from a new CBRE Viewpoint report, which tips that an overall 60% surge in international tourists will place pressure on major city airports and hotel markets such as Sydney and Melbourne that are operating just below peak capacity.

CBRE Research Manager Benjamin Martin-Henry said it was important for airports to maintain capacity, due to the direct correlation between new airline routes and an increase in tourism.

“Sydney, Melbourne, Brisbane and Perth account for 90% of all international arrivals and all operate just below peak capacity. To accommodate the forecasted tourism increase, the current crop of airlines would need to operate over 15,000 flights from mainland China – an almost threefold increase,” Mr Martin-Henry said.

“Plans for new runways and airports, including Western Sydney’s Badgerys Creek, are in place to meet the urgent and growing demands of both international and domestic tourists. Most are expected for completion in mid-2020’s, which should coincide with the current system tipping capacity levels.”

However, the tourism increase will also provide a relief valve for the hotels sector, which is currently experiencing a supply boom, with over 25,000 new rooms in the pipeline across the country.

CBRE’s report highlights that Sydney and Melbourne are expected to add over 10,000 new rooms between them, reflecting a 20% and 34% increase respectively. Australia’s less heralded hotel markets are also expected to be key beneficiaries.

Wayne Bunz, National Director, CBRE Hotels said while strong supply growth in Brisbane and Perth had previously placed downward pressure on room rates, if tourism volumes continue to increase both cities would be in the position to absorb the forecast influx of visitors.

“We are seeing new hotels opening on a regular basis as domestic and international developers actively seek to take advantage of Australia’s strong tourism fundamentals,” Mr Bunz said.

“Due to limited opportunities in Sydney and Melbourne, investors are looking for value in other hotel markets, such as Perth and Brisbane. History shows that strong capital gains can be made by investors who did not simply follow the herd but invested in underperforming markets.”

Mr Bunz added; “Whilst Brisbane will witness supply growth it will be a case of ‘short term pain for long term gain’ for the market as a whole, with the city positioned to benefit significantly from the addition of the second runway, touted to increase flight arrivals into the city by 59% by 2035.”

“The new runway coupled with major infrastructure projects which will be major demand generators for the city, including the $3 billion Queens Wharf Casino and the $2 Billion 'Brisbane Live' Entertainment Arena Precinct. With tourist volumes touted to continue to increase, Brisbane will be in a prime position to absorb the influx.”

Similarly, Hobart is set to experience the largest percentage room increase of any market (67%) and greater development activity is anticipated on the Gold Coast, due to the city’s high profile following the 2018 Commonwealth Games.

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